SmartPath Helps Companies Educate Employees on Budgeting and Saving

SmartPath is a budgeting app and financial advisor for the 75% of the US that lives paycheck to paycheck. SmartPath’s goal is to help you spend less than you make. They’re distributing the app through employers and helping them run financial wellness programs for their employees.

We sat down with Alok Deshpande to talk about what he’s building.

What YC Liked About SmartPath:

“We’ve seen a lot of budgeting and spending apps, but none of them work because they don’t seem to meet a deep enough need with a simple enough set of features. Smartpath built a solution for the set of people that have the most to gain from tracking their money. More importantly they did it in a way that solved the users problems, rather than the company’s need to make money on referrals. This is one of those products that makes lives better while building a huge company, which I love.” -Aaron Harris, Partner at Y Combinator

How did you get started on SmartPath?
I was working in financial consulting when the recession hit in 2008. A lot of the people in my town lost their jobs and homes. While the banks carried their share of responsibility, the lack of basic financial education for the masses also contributed.

I started digging into the problem and found that only four states require financial education to graduate from high school. That’s insane when you consider that literally every person has to deal with money in some way.

I decided to start teaching personal finance to low and moderate income workers across the country. About 75% of the U.S. population lives paycheck to paycheck, that’s about 90 million households. The one thing that consistently came up when I spoke with my students was that they needed help tracking their money. Many had never been taught and weren’t doing it so there was no sustainable way to help. I partnered with Jon to build the simplest budgeting and financial education app to help people spend less than they make.

How does the app work?
We work with employers to run financial wellness programs for their employees. In addition to running workshops, we integrate the app as a financial tool. It has three major components:

First, it tracks what we call your “Financial Fuel” – the difference between how much you make and how much you spend. If that number is negative, you’re getting deeper into debt. If it’s positive, you’re got money for your goals. It’s a simply metric everyone can understand.

Secondly, while employees are using the app, they get points. After a certain number of points, you’re entered into a raffle for prizes put in place by the employer.

Lastly, the app gives you lessons on how to make more and spend less. We give tips on how do you save on your grocery and utility bill or work with DoorDash to make a little extra income. All these lessons are embedded in the app.

There are tons of budgeting apps out there. How is SmartPath different?
There are apps like Mint or Personal Capital, but for the average person, they’re overkill. There’s too much stuff in one place. When you’re living paycheck to paycheck, the one goal is to get beyond paycheck to paycheck. That’s why we focus solely on your financial fuel. We’re not trying to manage your investments or give you credit cards. We’re focused on helping you spend less than you make.

Another way we’re different is that we work with your employer and use friendly competitions to drive accountability and engagement. Money is still seen as taboo, so it’s critical to have someone hold you accountable. By working with your employer and introducing the game dynamics, we’ve seen a huge difference. One of our pilots found that only 5% of employees were tracking their money. When we introduced the app, that number increased to 65%. This had an immediate impact on the business as well. We saw higher 401(k) participation and it lowered absenteeism by 30%.

It sounds like the employees really like it. What about the employers?
Companies are starting to understand that they have to inspire their employees if they want to see behavioral changes. You can’t expect people to change just by teaching them something. You have to inspire them to change and then give them the tools to do it.

Employers love how sustainable this program is. Some of them have tried other wellness programs that consist of online training videos. The problem with those is that you can teach people all you want, but if you want to really have an impact, you have to give them a tool with which to implement those learnings. That’s why we’re one of the few wellness programs with a built-in app component.

What’s the hardest part of changing financial behavior?
The biggest challenge is knowing where to start. Most people know about a third of what you think they know about money. Sometimes you see a huge gap in math skills which makes it hard to teach some concepts. You have to be aware of who you’re teaching and how you’re teaching them.

Employees have been inundated with information on insurance, 401(k) plans, investing and credit. It can get complex pretty fast but most employees are simply trying to spend less than they make. With that in mind, it’s important to understand that everyone will not become a financial expert. Instead, changing behaviors always starts with inspiration and simple steps. We believe those steps start with tracking your money and taking ownership on increasing your savings each month.

For example, with the emergence of the 1099 economy, we’ve seen people spend 10 hours a week working for Uber or DoorDash to make extra money. Similarly, employees will take pride in couponing or bringing their lunch when they see the impact on their finances. Amazing changes take place when you give people data and encouragement.

Why do you feel like right now is the time for a product like SmartPath?
If you consider health and wellness programs fifteen years ago, they were almost non-existent. Very few companies offered them, but now everyone is. Every insurance company has an attached wellness program and I see the same trend happening with financial wellness through employers. When I started teaching financial wellness six years ago, only a few financial institutions offered any kind of financial wellness program. Now, almost every bank has one.

How do you see SmartPath evolving?
Today, less than 10% of financial advisors service anyone who makes under $250,000. The world of financial advising is dedicated to those who have money. The only way to provide that same level of guidance and service to individuals of low and moderate income is through technology.

My vision for SmartPath is to become the go-to financial tool and advisor for low and moderate wage workers. I want them to see SmartPath as the trusted financial coach in their pocket for everything from budgeting to retirement and investing.